Companies gird for surge in e-discovery requests

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Mary K. Pratt

Special to the Journal

A number of companies expect an increase in requests for electronic discovery in the upcoming year, and they’re expecting bigger bills as a result, according to a new survey from Clearwell Systems Inc. of Mountain View, Calif., and Enterprise Strategy Group of Milton.

The survey, released Nov. 16, found that 73 percent of enterprises plan to bring e-discovery in-house as a result of increased litigation.

“There are certainly companies that litigate or are sued a lot, and they certainly have internal people doing these things,” said Stephen Y. Chow, a partner at Burns & Levinson LLP and co-chairman of the Massachusetts Bar Association’s Business Law Section.

The survey reported that 78 percent of respondents expect the number of lawsuits and regulatory inquires they experienced in 2009 to be up over their 2008 tally. This increase has corporate legal and IT departments spending more, even though companies are cutting costs nearly everywhere else. In fact, the survey found that about 80 percent of respondents said they’re spending more on e-discovery in 2009 versus 2008, with one-third of respondents saying they saw at least a 20 percent bump in spending this year. Moreover, nearly 40 percent said they expect a bump of 20 percent or more in e-discovery spending for 2010 as well.

“The costs of e-discovery are spiraling out of control,” said Kamal Shah, Clearwell Systems’ vice president of product management and marketing.

Shah said companies have generally outsourced most of the e-discovery process but are now tackling some of the work themselves to keep costs down. He said more companies are hiring dedicated professionals, with titles such as litigation support manager or e-discovery manager, to oversee the function.

“Cost is just so outrageous that if you’re expecting to litigate you’re talking about substantial savings by having some of this managed in-house,” Chow said.

Of the respondents who are bringing e-discovery in-house, Shah said 69 percent will focus on bringing in-house the most costly components of e-discovery — i.e., processing, analysis and review.

Debra Squires-Lee, a partner at Sherin and Lodgen LLP, said she doesn’t expect many companies to take the review process in-house because they’re usually not staffed to handle that crucial piece of work, which determines what pieces need to be removed because they contain privileged, confidential or otherwise excludable data, and which documents must go to opposing counsel.

But Squires-Lee said she’s not surprised that companies are taking on the technical piece, namely digging through servers and e-mails to capture relevant data.

“I could see companies doing it in-house if they had the expertise and the technical ability to do it,” she said.

She said she already has some corporate clients doing that initial search through their electronic universe on their own before seeking outside help to further cull and review the documents.

But, she said, not all companies have the resources to execute a search effectively. A technical search of electronic documents requires not only the IT systems to do it but an understanding of what parameters to put on the search to effectively target only the documents relevant to the case.

“You can gather enormous pieces of data in that search. Even when you try to just capture the part that’s mostly likely relevant to a case, it’s still overwhelming,” she said.

That’s why many companies use specialized litigation boutiques that can effectively execute searches to produce only the relevant documents, she said. She pointed out that paying for this service can actual save money because it limits the number of documents that attorneys end up reviewing – a task that is usually the most costly in the entire process.

“Most companies understand that a little bit of money upfront ends up saving more down the road,” she said. “More companies are accepting of that. They’re not happy, but they understand it’s money well spent.”

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